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W.W. Grainger Inc GWW

Morningstar Rating
$915.06 −0.23 (0.03%)
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Company Report

We Believe Grainger Is Well Positioned to Grow Faster Than Its End Markets

W.W. Grainger operates in the highly fragmented maintenance, repair, and operating product distribution market, where its over $16 billion of sales represents only 6% global market share (the company has 7% share in the United States and 4% in Canada). The growing prevalence of e-commerce has intensified the competitive environment because of more price transparency and increased access to a wider array of vendors, including Amazon Business, which has entered the mix. As consumer preference began to shift to online and electronic purchasing platforms, Grainger invested heavily in improving its e-commerce capabilities and restructuring its distribution network. It is the now the 11th-largest e-retailer in North America; it shrank its US branch network from 423 in 2010 to 246 in 2021 and added distribution centers in the US to support the growing amount of direct-to-customer shipments. Still, the company had work to do on its pricing. Grainger historically relied on a pricing model that applied contractual discounts to high list prices. Leading up to 2017, though, this model made it difficult to win new business. To address this problem, Grainger rolled out a more competitive pricing model. Lower prices hurt gross profit margins, but volume gains, especially among higher-margin spot buys and midsize accounts, have offset price reductions and helped the company meet its 12%-13% operating margin goal by 2019 (12.1% adjusted operating margin that year).

Price vs Fair Value

GWW is trading at a 358% premium.
Price
$915.06
Fair Value
$266.00
Uncertainty
Medium
1-Star Price
$718.50
5-Star Price
$999.00
Economic Moat
Mxwsp
Capital Allocation
Zvbqpqq

Bulls Say, Bears Say

Bulls

With a more sensible, transparent pricing model, Grainger should continue to gain share with existing customers and win higher-margin midsize accounts.

Bears

Amazon Business could disrupt the industrial distribution industry, taking market share and pressuring Grainger’s margins.

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News

Trading Information

Previous Close Price
$915.29
Day Range
$902.25916.15
52-Week Range
$674.411,034.18
Bid/Ask
$557.09 / $1,995.50
Market Cap
$44.90 Bil
Volume/Avg
389,166 / 241,471

Key Statistics

Price/Earnings (Normalized)
25.00
Price/Sales
2.74
Dividend Yield (Trailing)
0.83%
Dividend Yield (Forward)
0.90%
Total Yield
3.00%

Company Profile

W.W. Grainger distributes approximately 1.5 million maintenance, repair, and operating products that are sourced from over 4,500 suppliers. The company serves roughly 5 million customers through its online and electronic purchasing platforms, vending machines, catalog distribution, and network of over 300 global branches. In recent years, Grainger has invested in its e-commerce capabilities and is the 11th-largest e-retailer in North America.
Sector
Industrials
Industry
Industrial Distribution
Stock Style Box
Mid Growth
Total Number of Employees
26,100

Competitors

Valuation

Metric
GWW
MSM
WCC
Price/Earnings (Normalized)
25.0013.6712.49
Price/Book Value
14.043.221.67
Price/Sales
2.741.130.39
Price/Cash Flow
19.9110.169.31
Price/Earnings
GWW
MSM
WCC

Financial Strength

Metric
GWW
MSM
WCC
Quick Ratio
1.240.721.20
Current Ratio
2.192.012.21
Interest Coverage
28.7019.803.31
Quick Ratio
GWW
MSM
WCC

Profitability

Metric
GWW
MSM
WCC
Return on Assets (Normalized)
23.90%12.96%4.52%
Return on Equity (Normalized)
64.29%22.77%14.11%
Return on Invested Capital (Normalized)
33.14%16.92%9.05%
Return on Assets
GWW
MSM
WCC
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